Threat of a second drop in home prices could push more underwater homeowners to walk

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Stabilizing home prices haven’t yet done much to help those who bought in areas that fell victim to the largest of the boom-and-bust waves, CNBC’s Diana Olick wrote today. Many of these buyers — especially in Florida, Arizona, Nevada and California — purchased homes at peak prices and are now the furthest underwater on their mortgages. For those who can’t afford to keep making payments, or who don’t feel it’s worth it do so on a house whose value may never return, biding time before the bank moves to foreclose or simply walking away from the property is beginning to make sense. Olick said she is concerned that the emerging signs of stabilization in home prices may not be sustainable after the government stops artificially propping up the market with stimulus funding. If that’s true, a second dip in home prices could force underwater homeowners even deeper into debt. [CNBC]

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